Emerging evidences have revealed tumor-specific gene methylation is considered to be a promising non-invasive biomarker for many different types of cancers. This study was determined whether TMEM196 gene hypermethylation and downregulation are considered to be promising biomarkers for early diagnosis and prognosis in lung cancer. Methylation status was detected with methylation-specific PCR. Kaplan-Meier survival curves and Cox regression analysis were used to determine the significance of prognosis. TMEM196 gene was hypermethylated in 68.1% (64/94) of lung cancer tissues, 52.8% (67/127) of plasma and 55.2% (79/143) of sputum samples, but unmethylated (0/50) in normal tissues. TMEM196 methylation in plasma and sputum samples was significantly correlated with that in the corresponding paired tumor tissues (r = 0.750, r = 0.880, P < 0.001). TMEM196 aberrant methylation in cancer tissues, plasma and sputum DNA was significantly associated with age and pathological type (P < 0.05). TMEM196 high methylation could robustly distinguish lung cancer patients (AUC = 0.905) from normal subjects and patients with TMEM196 high methylation have a significantly poorer survival than those with low level from The Cancer Genome Atlas (Wilcoxon P < 0.001). Multivariate models showed TMEM196 methylation is an independent prognostic marker in lung cancer. Furthermore, the overall survival of patients with low TMEM196 expression was significantly poorer than that of TMEM196-high patients (P < 0.001, log-rank test). Low TMEM196 expression in tumor tissues was found to predict poorer survival (HR = 3.007; 95%CI, 1.918-4.714). Our study provided new insights into the clinical importance and potential use of TMEM196 methylation and expression as novel early diagnostic and prognostic biomarkers for human lung cancers.